The Jurisprudential and Legal Analysis of the Delayed Payment Fine in Banking Contracts in Iran

Delay in debt repayment by bank customers is one of the challenges facing the Islamic banking system in Iran. One solution to this problem can be the stipulation of a delayed payment fine in banking contracts. Since there is a disagreement about the legitimacy of this solution amongst jurists (fuqaha), it is necessary to analyse the jurisprudential (fiqhi) views in this regard, clearly explaining the nature of the delayed payment fine. Making use of an analytical and descriptive approach, this paper makes use of Shi'a sources to prove the hypothesis that the 'delayed payment fine' is punitive in nature and is different from interest or a fine due to late payment which is compensatory in nature. Apart from its similarity to riba (usury), the idea has other juridical and legal problems undermining its practicality in settling the late repayment issue. Proving this hypothesis provides one with the exact definition of the 'delayed payment fine' and helps in deducing the most accurate shari'ah decree in this regard.